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Author
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Topic: Chinese trader goes missing; China may not back its $100 million bad trade
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rasmus
malcontent
Babbler # 621
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posted 17 November 2005 06:07 PM
A trader for the Chinese government on the London Metals Exchange who made a losing short trade for more copper than exists in global inventories has gone missing. The Chinese government now claims he was acting in a personal capacity, and not for his employer, the Chinese government, although it is well known that ALL trades are decided on by China's Strategic Reserve Bureau before they are executed. China blames missing copper trader for losses
quote:
China raised the possibility that it might not recognise a series of controversial copper trades on the London market when a Beijing official said the Chinese trader who made them was acting in a personal capacity and was no longer employed by the government.The comments from an official at the Strategic Reserve Bureau were the first public acknowledgement from the Chinese government that Liu Qibing, the copper trader, had made potentially loss-making trades on the London Metal Exchange. “As far as I know, the loss was a result of his personal actions, instead of the government,” an official at the SRB told China Daily, the official English-language newspaper. The trades were described as massive. Market concerns that China may be forced to cover a big loss-making position as a result of the trades pushed copper prices to fresh highs of $4,185 a tonne on the London Metal Exchange yesterday, though it closed slightly down at $4,170. Mr Liu was a director of the State Regulation Centre for Supplies Reserve, a government agency that conducts financial market operations on behalf of the SRB, which manages the government's supplies of raw materials. He is well known in the copper market in China and in London but has not been seen for weeks.
China copper auction fails to dent prices quote:
Copper continued to trade close to record highs as China’s State Reserve Bureau failed to dent prices after it sold 20,000 tonnes of copper in its first public aution.The SRB also said it would sell a further 20,000 tonnes on November 23 in a bid to drive down prices to limit potential losses on a huge short position which a Chinese trader is rumoured to have built up in the market. “Most lots sold between 38,500 yuan and 38,600 yuan ($4,762 and $47775 a tonne), which is in line with the markets valuation said “Cai Luoyi, an analyst at China International Futures Corporation. China’s State Reserve Bureau took further measures to calm the market with reports that it is trying to convince the State Council, China’s policy-making body, to let it export 200,000 tonnes of copper stocks. [...] Liu Qibing, a Chinese trader, allegedly built up a substantial short position in copper in the name of SRB, said to be between 100,000 and 200,000 tonnes. Analysts doubt whether the SRB has enough copper to stabilise the market. Global inventories are estimated at 140,000 tonnes of which the LME holds 65,000 tonnes.
Brokers may lose if China walks from trade
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The big loss-making short position that a Chinese trader is said to have built up in copper futures will not cause the London Metal Exchange (LME) to melt down, although its brokers could end up out of pocket.Trades on the LME are centrally-cleared and guaranteed by a clearing house. But LME brokers would have to cover losses if their customer walks away from the debt, although they would then initiate legal action.
From: Fortune favours the bold | Registered: May 2001
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letitbleed
rabble-rouser
Babbler # 7811
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posted 18 November 2005 06:07 AM
As a former banker, I can tell you that any person or bank will "DK" you ("didn't know) on a trade if they can get away with it. Most likely after some legal wrangling major institutions will settle them. Trading room transactions are recorded so it'll be pretty easy to determine in whose capacity he was trading in. Or perhaps he was front running his own secret position. Who knows? To answer your question, if you seek physical delivery of futures and your counterparty cannot come up with the commodity you settle in cash. Price is based on your settlement price. This would be a rare occurrence as a dire shortage in a commodity would be reflected in the future price of the commodity. You'd be better off trading your current position into a future contract to exploit the price difference. It's funny how some people on this site wring their hands at an impending end of oil supplies while the financial markets of this world absorb shocks through financial instruments. There'll never be an end to oil supplies; it's just a matter of price.
From: vancouver | Registered: Jan 2005
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Tommy Shanks
rabble-rouser
Babbler # 3076
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posted 18 November 2005 10:29 AM
quote:
Who knew copper was so pricey? Are pennies still made of copper? Or is it zinc now?
Well, a few years back copper was around $.70/lb, around where it had been for a number of years. Now it's a $1.95/lb, a substantial increase due in part to the huge demand from China. It's also why there is such a demand for scrap and a rise in theft of wire and plumbing tube and roofing sheet from job sites. Copper scrap is probably the easiest metal to recycle and get rid of at scrapyards today. And pennies are now made of copper-plated zinc. However if you have a stash of the old solid-copper pennies, truck them down to a recycler rather then a bank. You'll probably get more. [ 18 November 2005: Message edited by: Tommy Shanks ]
From: Toronto | Registered: Sep 2002
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